Collection

[Tomcat]

The term "collection" is of Italian origin, it means "to the cashier". A collection operation is a contract of order. In this form of settlement, the client instructs his bank (issuing bank) to receive on his own behalf and at his own expense the amount of money due to him from the debtor counterparty. The issuing bank, as a rule, attracts another bank for this operation, which is located at the place of the payer's location and is called the collecting or executing bank.

In our country, collection settlements are regulated by the Civil Code (Art. 874-876) and Bank of Russia Regulation No. 2-P. Settlements for collection are a banking operation through which the bank (issuing bank), on behalf of and at the expense of the client, on the basis of settlement documents, takes actions to receive payment from the payer. Settlements for collection can be made on the basis of two settlement documents: by means of a payment request or a collection order. Payment claimis a settlement document that contains the requirement of the creditor (recipient of funds) under the main agreement to the debtor (payer) for the payment of a certain amount of money through the bank and payment of which can be made by order of the payer (with or without prior acceptance, i.e. without acceptance order). Settlements by payment claims are a relatively new form of settlements in the Russian on-farm turnover. It was introduced in 1990. In turn, a collection order is a settlement document, on the basis of which funds are debited from the payers' accounts in an indisputable manner (without the order of the payer).

Settlements by means of a payment request or collection order are less widely used in the Russian payment system than credit transfers. The share of payments in the form of direct debits (through a payment request or collection order) in 2008 amounted to 3.4% of the total number of payments made by the Russian banking system, in 2009 - 0.5%, respectively. The most common form of direct debit in Russia is payment claims, settlements through which in 2008 accounted for more than 70% of the total number of debits, in 2009 - about 58% | Bank of Russia, 2011].

On the territory of the Russian Federation, a positive acceptance can be applied when the payer gives the credit institution a written consent or disagreement to write off funds from the account in full or in part (full or partial acceptance, respectively). Subsequent acceptance is also possible, which provides for immediate payment of settlement documents. However, in this case, the payer has the right to refuse acceptance and demand a refund within 3 working days. The form of settlements with subsequent acceptance can be applied upon prepayment of the contract value.

Settlements through payment requests for goods delivered, work performed, services rendered, etc. can be carried out with the preliminary acceptance of the payer, when the payment is made not earlier than the expiration of the time allotted for the acceptance of the payer. As a rule, this form of payment is used in the subsequent form of payment for goods or services. For the payer, this type of acceptance is attractive, but suppliers prefer not to use it, since the buyer in this case actually uses a preferential commercial loan during the validity period of the preliminary acceptance.

The period for accepting payment requests is determined by the parties to the agreement, but this period must be at least five working days, not counting the day the documents are received by the bank. Documents awaiting acceptance or rejection are placed in card index No. 1 in the debit of off-balance sheet account 90910 "Settlement documents awaiting acceptance for payment" and are there until acceptance or rejection is received. If the payer has given an acceptance, but there is not enough money on his account to pay for the goods, the accepted payment requests (or payment requests for direct debiting) are placed in card index No. 2 on off-balance sheet account 90920 "Payment documents not paid on time." The nominated bank is obliged to send a notice to the issuing bank about the placement of settlement documents in file cabinet No. 2. In this case, a penalty is charged for each day of delay.

The benefit of using an acceptance for the buyer (payer) is that he has time to verify that the quality of the delivered goods meets the terms of the contract. The reason for the complete refusal of acceptance may be the delivery of an unordered product, payment for it earlier or the supplier's violation of the delivery time, etc. The reason for the partial refusal of acceptance may be the discrepancy between the price of the goods and the terms of the contract. Refusal of acceptance must be explained and motivated. For the supplier of goods (recipient of funds), settlements using payment slips are associated with a risk, since he does not have information about the availability of funds in the payer's account, i.e. there is no guarantee of payment. In addition, there is a risk of unjustified refusal of acceptance.

The settlement scheme using payment requests with acceptance includes 10 stages and is shown in Fig. 2.3:

• 1. Shipment of goods, performance of work, provision of services.
• 1a. Forwarding shipping documents.
• 2. Delivery for collection to your bank of payment requests in the name of the buyer at the register.
• 2a. Handing over with the bank's mark of the 2nd copy of the register of payment requests together with their last copies.
• 3. Sending documents to the buyer's bank for presentation to the buyer for payment.
• 4. One (third) copy of the payment request is handed over to the buyer for acceptance.
• 5. The remaining two copies of the payment request will be placed in the bank filing cabinet No. 1 “Payment documents awaiting acceptance”.
• 6. The buyer submits a statement of partial refusal to accept the supplier's payment request.
• 7. The payment request is withdrawn from card index No. 1, paid from the buyer's current account in the amount accepted by him. In this case, the first copy of the payment request, together with the first copy of the application for partial refusal of acceptance, remains in the documents of the bank's day, and the second copy of the application for refusal of the buyer's acceptance, together with the second copy of the payment request, is sent to the supplier's bank.
• 7a. Handing over to the buyer a statement of his current account and a third copy of the application for refusal of acceptance with a mark of the bank.
• 8. Sending documents and transferring funds to the supplier's name to the supplier's bank.
• 9. Crediting funds to the current account of the supplier in the amount of the payment request accepted by the buyer.
• 10. Handing over to the supplier a statement of his current account, the buyer's statement of partial refusal to accept the payment request.

A collection order involves the debiting of funds in an indisputable manner and is applied in three cases:

• - when the indisputable procedure for collecting funds is established by law (for example, writing off funds when collecting tax arrears and other obligatory payments to the budget, amounts of fines, etc.);
• - for the collection of executive documents issued by judicial and arbitration authorities;
• - if there is a condition in the bank account agreement on direct debiting of funds or on the basis of an additional agreement to the bank account agreement containing the corresponding condition.

It is worth noting that in the case of an indisputable write-off of funds on the basis of a collection order according to executive documents, these documents must be attached to the collection order.

Settlements using a payment request and a collection order are a form of debit transfer, where the recipient of the money is the initiator of the settlement process. They are presented by the recipient of funds (recoverer) through the bank that serves the recipient of funds (recoverer).

When using payment requests without acceptance, the payer grants the bank the right to pay payment requests received in his name without his consent. Usually we are talking about regular payments for utilities, communications, insurance, loan repayment, etc. The payer must provide the bank with information about those creditors who will have the right to make payment requests for debiting funds without authorization, and also indicate the number and date of the main agreement where such an operation is provided.

 

[Tomcat]

Recall that collection is a banking operation in which the bank, on behalf of the exporter, acts as a trustee and intermediary between the exporter and the importer. The exporter instructs his bank to receive from the importer the amount due to him or the acceptance of a bill against the presentation of documents confirming their delivery or performance of services. Collection operations have become widespread in the field of international trade. In this regard, the International Chamber of Commerce published in 1995 "Universal rules for collection". According to this document, two forms of collection are used in international circulation: clean collection and documentary collection. In the case of a clean collection the bank fulfills the client's order to collect the amount of money by submitting a payment request without commercial documentation, i.e. only financial documents are collected. In case of documentary collection, the bank undertakes to receive the amount due to the seller (principal) against the transfer of commercial documents.

There are four parties involved in a documentary collection operation:

• 1. Exporter - a seller (principal) who prepares documents for collection and submits them to the bank with a collection order;
• 2. Remitting bank - a bank that receives documents from the seller and transfers them to the collecting bank in accordance with the instructions received;
• 3. Collecting bank - any bank that participates in the execution of a collection order, with the exception of the remitting bank. In turn, the presenting bank is the collecting bank that presents the documents to the payer [1];
• 4. Importer - payer (buyer) - a person to whom documents for collection are presented.

The interaction of participants when using documentary collection in international circulation is shown in Fig. 3.2:

• 1. The exporter enters into a contract with the importer for the sale of goods on the basis of settlements under documentary collection.
• 2. The exporter sends the goods to the importer.
• 3. The exporter (principal) sends to his bank a collection order and commercial documents. The exporter's bank (remitting bank - transferring bank) forwards the collection order and commercial documents to the collecting bank (i.e. the importer's bank).
• 4. The collecting bank (bank of the importing country) submits the collection order and documents to the importer to receive payment (or the acceptance of drafts, depending on the instructions contained in the order).
• 5. The presenting bank shall present the documents to the payer (importer) in the event that the collecting bank entrusts the operation to another bank, and does not perform it itself. Documents are issued to the payer only against payment.
• 6. The importer pays for the documents to the collecting bank using technical means of transferring banking information (depending on the instructions).
• 7. The collecting bank transfers the payment to the remitting bank (exporter's bank).

Chapter 3. Forms of settlements for foreign trade operations

8. The remitting bank credits the transferred amount to the account of the exporter (drawer).

Note that all banks participating in collection settlements act only as intermediaries and do not bear any responsibility for non-payment or non-acceptance of documents (drafts). In case of non-payment or non-acceptance, the importer's bank shall notify the principal or his bank about it.

In the case of documentary collection, the bank submits a payment request to the payer (debtor) with the accompanying documents of title:

• a) against the payment of money by transferring funds to the account of the recipient client with the issuing bank;
• b) against the acceptance of a bill of exchange (waste) attached to documents;
• c) only against payment (collection with acceptance).

The first option in international terminology is called “documents against payment”, the second - “documents against acceptance”, the third - “documents against payment only”.

Issuance of documents against payment assumes that the collecting bank can issue documents to the buyer only against payment in cash, i.e. only if the payment amount can be received immediately. The second method is used, as a rule, in cases where the seller has long-term relationships with the client and is confident in his honesty and reliability (since he only has a bill in his hands). The accepted draft is kept in the nominated bank until the moment of payment, after which the documents will be issued to the payer. The third type of documentary collection is used very rarely in practice. In this case, the documents are issued to the buyer only after the due date for payment, the bill of exchange accepted by the buyer, which the collecting bank presented to the buyer for acceptance, also remains with the bank until the due date for payment. In turn,

The collection form of settlements is beneficial for the importer, since it implies payment for the actually delivered goods, and the costs of conducting a collection operation are relatively small. Settlements in the form of collection allow banks to exercise control over the timely receipt of payment, however, banks, as a rule, do not have real levers of influence on the importer in order to accelerate the payment (acceptance) of documents. The collection form of settlement is to a certain extent beneficial to the exporter, since banks protect his right to the goods until the payment of documents or acceptance of drafts (unless, of course, the exporter gave instructions on issuing documents without payment). The right to the goods is given to the importer by the documents of title, which he takes possession of after they have been paid (acceptance of drafts), if the exporter has not given instructions to the banks to issue documents without payment.

The main disadvantage of the collection form of settlements is the length of time the documents run through banks and, accordingly, the period for their payment (acceptance), which can range from several weeks to a month or more. In addition, the importer has the right to refuse to pay for the submitted documents or not have permission to transfer currency abroad. In this case, the exporter will incur the costs associated with storing the goods, selling them to a third party or transporting them back to their country. In this regard, bank guarantees may also be issued to secure the acceptance of drafts sent for collection.

• [1] Sometimes the collecting and presenting banks are considered as one bank that receives the payment due to the seller or the remitting bank on the basis of commercial documents, or receives the payer's acceptance in accordance with the instructions of the remitting bank [Daishev, 1995, p. 44].